What Does a Key Person Life Insurance Do?

Some businesses owe their success to the hardwork of some individuals who leave no stone unturned to take their company to new heights. These individuals are the key persons of an organization. What would happen if one of these key persons dies all of a sudden? The company would receive a big setback. In such adversities, key person life insurance might offer some kind of consolation.

What are the key benefits of key person life insurance?

  • Covers losses
  • Business can continue its operations
  • Offers financial stability to business
  • Avoids dissolution of business due to lack of funds

The employer is the policy holder and the beneficiary of key person life insurance. The key person is the insured who is considered invaluable to the organization. The employer has to shell out the premiums for a key person insurance policy. Though the premiums are not tax-deferred, the death money paid to the beneficiary is always tax-free.

Finding a capable person and then bringing him up to the level of the deceased is an uphill task and requires lot of resources. The money received from key person life insurance can be used for hiring and training the new person who would be in charge of the deceased’s responsibilities.

With the help of key person life insurance, the business can continue its operations in a smooth manner without worrying about funds. The losses that the organization might have suffered due to the death of a key person can be covered with the help of the death benefit. The death claim can be used to pay off any loans that the organization might have taken.

Sometimes, after the death of the owner, heirs of the business face lot of trouble in coping with the financial losses and due to this a lot of businesses are shut down. But if you have key person life insurance, you don’t have to worry about anything. All your estate tax debts can be taken care of with the death benefit that you receive after the death of the policy holder.

It is often seen that after the death of owner/CEO of an organization, the creditors and customers look at the business with suspicious eyes. There are so many questions that crop up in everyone’s mind regarding the fate of the organization. Key person life insurance reassures the creditors and customers that your business is a healthy state and you do not lose out on your existing and/or prospective clients.

Workforce is the most important resource of an organization. To protect individuals who are the pillars of an organization seems like a wise move. It is not possible to get the dead ones back, but with key person life insurance, it becomes a lot easier to deal with the loss.